Ebola has been dominating media coverage of Sub-Saharan Africa ever since a man stricken with the disease landed in Lagos in July. Despite the scary headlines, businesses must differentiate fact from fear in order to assess the virus’ potential impact on their West African operations. Here is what companies need to know:
Which countries are most affected by the disease?
Ebola particularly has affected small markets within West Africa. These include Guinea, Liberia, and Sierra Leone –poor economies whose governments have not been able to deal with the outbreak effectively. As of late August, about 2,000 deaths were reported in the three countries, and the WHO expects many more people to be infected with the virus.
To date, Senegal reported one death, and Nigeria reported seven deaths. Lagos State so far has proven to be quick and effective in its measures to contain the spread of the disease. In fact, various infected patients were released successfully after treatment. However, after Ebola has spread to River State in Nigeria and it remains to be seen how effective that state government will be in containing the outbreak.
Above: A map published in the BBC highlights affected areas. Most multinationals operating in the region are present in the three largest economies: Nigeria, Ghana, and Côte d’Ivoire. All countries are on high alert, but are not facing the epidemic to the same degree.
What are the economic repercussions?
On Sierra Leone, Liberia and Guinea: The African Development Bank expects a 4% reduction in Sierra Leone’s GDP, the economy is currently growing at 14% The Liberian government estimates it will lose up to US$30 million to fighting the disease. The worst-hit sectors in all three countries are agriculture, services, and mining.
In Nigeria, the panic over the Ebola outbreak is estimated to cost the country US$2 billion in Q3. Aviation, hospitality, and tourism, and trade will be most impacted. Restaurant visits in Lagos are likely to decline by 50% this quarter as people avoid crowded places. If the crisis extends into Q4, the economic loss could reach US$3.5 billion.
The government closed Côte d’Ivoire’s borders with Liberia and Guinea. The western part of the country is one of the most fertile regions for cocoa, Côte d’Ivoire’s primary export. Border closures restrict the movement of international cocoa exporters and statisticians who calculate output forecasts for the upcoming October harvest. As a result, traders and exporters will not have accurate forecasts to predict the current cocoa crop, which could adversely impact exports and weigh on Côte d’Ivoire’s GDP growth.
In Ghana, the impact of the disease is less direct but still felt by businesses. As the local representative of an international organization put it:
“A lot of businesses and embassies in Accra are devoting a LOT more time to Ebola. ‘Freaking out’ would be a good way to put it. While they are not changing strategies, they are definitely losing productivity as they’re putting all kinds of people just on monitoring what’s going on in neighboring countries, having daily briefings on Ebola news, etc. As an example of what I’m talking about, a friend at a Western European embassy in Accra whose portfolio is legal and justice advisory was spending 12 hours a day just sending reports back to his home capital on Ebola news.”
What does this mean for businesses?
Multinationals should expect commercial activity to be marginally subdued this quarter and next as business and consumer demand slows because of the restricted movement of goods and people.
However, as in all crises, some sectors of the economy also benefit. On the one hand, governments across West Africa are spending a larger than planned part of their 2014/2015 budgets on healthcare, and on reactive and preventive measures to contain the disease. Companies selling materials used for the screening and treatment of the disease will see a spike in sales. Companies selling products widely perceived to protect from potential infection, such as hand sanitizers and antibacterial soap, will also benefit.
The sectors directly related to the fight against Ebola are not the only ones that will benefit from the crisis. E-commerce, already increasing in popularity in the last three years in Nigeria, has received a real boost as people avoid public places.
What should I expect?
It is very difficult to predict if the disease will spread further and companies need to monitor the situation closely.
However, FSG believes that a further spread is unlikely as governments have implemented tough measures to try and contain the disease. We expect the health crisis to begin to subside towards the end of the year as these measures take effect. The economic repercussion nonetheless will be felt in 2015, particularly in Sierra Leone, Guinea, and Liberia.
Should the crisis worsen, governments are likely to pass tougher measures that will hamper logistics and productivity further.
What should businesses do next?
- Outline a contingency plan: A contingency plan allows companies operating in the area to manage risks and seize opportunities as they materialize. A contingency plan helps, for example, to define alternative work locations for employees, outline strategies to deal with transport disruptions, and position marketing strategies to respond to the changing environment. For example, businesses can adapt packaging for consumption at home rather than in public places
- Educate staff, both local and international: Given that this is a health crisis, MNCs need to articulate time and over again the need for washing hands and being vigilant health-wise to their local partners. Local staff should implement simple measures to protect themselves, while international staff should be educated about the disease and the relative difficulty of infection. It is important that employees travelling to the region are not stigmatized within the company, as this will lower productivity and decrease employees’ willingness to work in the region, thus impacting long-term plans for West Africa
- Don’t generalize: Companies should monitor the situation closely on the WHO website, differentiate clearly the risks by country, region, and city, and reduce travel to affected areas. For example, while it is unwise to travel to quarantined areas in Sierra Leone at the moment, visiting Ghana and large parts of Nigeria is very low risk
- Adopt a wait-and-see approach, but don’t change your plans: Most multinationals operating in the region have adopted a wait-and-see mode until the crisis subsides, but are not changing their investment strategies as the opportunity in the region’s larger economies is too big to ignore. In fact, companies should take advantage of the current uncertainty to position their business for growth once normality returns to the markets
- Highlight your commitment to countries, despite the crisis. Healthcare companies can take the current outbreak as an opportunity to gain customer loyalty and market share by providing help and support where it is most needed
- Prepare for trends that are here to last. The popularity of E-commerce has been enhanced by Ebola and is here to stay. Plan your e-commerce strategy for Nigeria now